CONTRACTUAL OBLIGATIONS
AND THEIR ENFORCEMENT
Chapter 11
TRANSFER AND DISCHARGE OF
OBLIGATIONS
Chapter 11-1
Transfer of Contract Rights and Duties
 Assignment - transfer of a right a party may have
under a contract to another.
 May transfer right to collect payment (mortgage/loan)
 Assignor – person who transfers the contractual right.
 Assignee – the party who receives this contractual right.
 Does not always have to have consideration
 Assignee has exactly the same contractual rights.
 If the obligor (one who owes a duty under a
contract) breaches the contract it is the assignee
who must sue for breach.
Question
Whipple bought a high-powered sports
coupe from Oriental Motors for $32,000.
After a down payment of $2,000, the balance, plus a finance
charge, was to be paid by mail in installments over the
following 48 months. Oriental Motors needed cash to
restore its inventory of new cars. It immediately sold
Whipple’s contract to a finance company, Palmout Inc., and
told Whipple to mail all installment payments to Palmout. Is
such a transfer of contract rights legal?
Yes, the can. The parties involved are:
Assignor: Oriental Motors
Assignee: Palmout
Obligor: Whipple
Non-Assignable Rights
 These contract situations cannot be transferred:
 a right created under a contract that prohibits transfer
of the contractual rights (specified in contract)
 claims for damages for personal injuries
 claims against the United States (you sue the govt)
 rights to personal services, especially those of a skilled
nature, or when personal trust and confidence are
involved (sue your doctor).
 assignments of future wages, as limited by state
statutes. (sue because you can’t work anymore)
What if you win the Lottery?? Can you share?
Discharge of Contractual Obligations
 By Performance
 By the Initial Terms
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 By Subsequent Agreement
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 By Impossibility of Performance
 By Operation of Law
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 By Tender of Performance
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By Performance
 Discharge – termination of duties that
ordinarily occurs when the parties
perform promised.
 Breach of Contract – failure to provide
complete performance.
 When one party fails to perform a crucial duty
under a contract, the other party may treat such
a failure as a major breach and regard their own
obligation as discharged.
 Cancellation – in sales contracts under UCC
By Performance
 Substantial Performance – when just about all the
duties are performed but a minor duty under the
contract remains. This is a minor breach.
 Still have to perform, or can sue for part that was not
done.
 Worker can also sue for payment of portion done.
 Timing of Performance
 If not specified, anytime
 If specified and slight portion not done by due date,
“minor” breach
 “Time is of the Essence” and not done, “major”
breach.
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By the Initial Terms
 When parties prepare their contracts they may
agree to terminate:
 on a specific date or specific period of time
(contracts with school district terminate on last day of
school).
 upon occurrence of specified event (contract to
have lawn mowed while you are gone—then you resume
when returning.)
 upon failure of a certain event to happen (Real
estate doesn’t sell by a certain date)
 at the free will of either party upon giving
notice
(Teacher retires, but gives notice)
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By Subsequent Agreement
 When parties mutually agree to change
either the terms or the nature of their
relationship the following ways:
 Rescission – parties agree to undo.
 Accord and Satisfaction – This discharges their
original contract by substitution. An
agreement to make such a change is an
accord. (see WHAT’S YOUR VERDICT)
 Novation –agreement to accept a new person
to do the job.
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By Impossibility of Performance
 Extreme external conditions rather than an
obligor’s personal inability to perform.
 Unique item identified in the contract is
destroyed (sell your snowboard on eBay, then
your house burns).
 Performance becomes illegal before it can be
rendered (installing asbestos shingles on a
new building).
 Death or disability of someone who was to
provide a personal service that only that
person could render .
 If “escape hatch” language that would permit
modifications or even termination.
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By Operation of Law
 Contract may be discharged, or the right to
enforce it may be barred (Bankruptcy). Also if
time allowed for enforcement has reached
statute of limitations.
By Tender of Performance
• Tender – a ready, willing and able offer to
perform an obligation (such as money). If
rejected, you are discharged.
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REMEDIES FOR BREACH OF
CONTRACT
Chapter 11-2
Remedies of a Breach
Minor Breach:
 Only remedy available is money damages (value of
what’s left to do).
 Injured party must continue to perform
Major Breach
 injured party does not need to continue performing
the duties in the contract
 Recession and restitution
 Money Damages
 Specific Performance
Money Damages
 Payment of money to compensate for injury. May be:
 Compensatory –same financial position had breach
NOT happened
 Consequential –same financial position if contract
would’ve been performed
 Liquidated—agreed on amount by parties should
contract not be completed
 Punitive—punish and make an example of
defendant
 Nominal—wrong, but no injury, court will award
nominal damages
Statute of Limitations
 Statues in all states deny any remedy if suit is
not brought within a certain time after a
legal claim. Called statue of limitations.
 Four years is common for contracts
 3 years is common for torts
 ½ states allow more time for written
contracts than oral
 Time begins running from moment there is a
right to sue for a breach or default.
THE MARRIAGE CONTRACT AND
DIVORCE
Chapter 11-3
Do you plan on getting
married?
What is marriage?
Marriage and Contracts
 Marriage – a legal union of a man and woman as
husband and wife (unless otherwise 8 states
recognize same-sex marriage).
 Typical minimum age (varies by state) to marry 18
years.
 Close relatives may not marry.
 16 States recognize common-law
marriage (living together but no
wedding)
Alaska Marriage Law!
Contractual Elements of Premarital
Relationships
 If one party proposes marriage and the other accepts,
a binding contract results.
 If only one party want to end this then breach of
promise suit may be brought. Not many states allow
anymore.
 If 3rd party (not parents) interferes with engagement
suit could be brought.
 If ring given by other in expectation or marriage the
courts generally order it returned. Some say woman
keeps ring if the man breaks off the engagement. It
depends on the state
Contractual Elements of Marital Relationships.
 Marital Consortium – mutual duties of wife and
husband.
 You can sue if injury prevents consortium!
 Support, nurture, welfare and education of children
 contracts, notes
 income tax returns
 Rights and duties of parenthood - support their
children until they reach adulthood.
 Both parents have custody rights to their children
 Joint obligation
Contractual Elements of Marital Relationships.
 Property rights and Duties – property acquired
during the marriage may be kept in either spouses
name.
 One spouse may incur debt for other spouse.
 Prenuptial agreement – spouses bringing property
into a marriage that wants sole claim over it must
get this.
 Give up claim to any future part of all of the
other’s property.
List of most expensive divorces
Ending the Marriage – Annulment
 Annulment – a court order that cancels a marriage
because of a problem that existed from the beginning
of the marriage.
 Marriage considered voidable or void
 Voidable reasons – (marriage valid until annulment)
 Refusal to have children grounds for annulment
 Marriage on fraudulent grounds such as lying about
pregnancy health, disease, past marriage or age.
 Void Reasons – (Marriage considered invalid from
beginning.) Creates no duties for either party
 Violation of law – already married (bigamy)
 Marriage of close relatives
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Ending the Marriage – Divorce
 Divorce – court dissolution of marriage. Court
divides property and responsibilities and property.
 Separation – first step toward divorce.
 maintain separate living quarters but marital rights and
obligations remain intact. Can negotiate legal
separation agreement that covers custody's support,
alimony and property division.
 No fault divorce – no assignment of fault for the
dissolution.
 dissolution may be initiated by either spouse.
 granted after testimony that there is no chance of
repairing the marriage.
 Most states irreconcilable differences are stated as
legal reasons
 Usually 6 months till final.
Division of Property
 Most states based on English common law
 Anything in one spouse’s name only stays that way
 Community Property states
 ½ property acquired by marital partners during the
marriage is presumed to belong to each.
 During marriage whatever earned, inherited, received as
gift also remains the property of spouse who earned or
received it
 Most states provide some type of equitable distribution or
marital property upon dissolution of marriage. Many factors
such as length, age etc. considered.
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Child Custody and Support
 Physical care and responsibilities for a child
 Welfare of the child is most important
 Factors considered are:
 Parents’ wishes
 Child’s wishes
 Child’s relationship with parents, siblings and others that
affect the child
 child’s adjustment to home, school and community
 physical and mental health of all person concerned.
 Joint custody - responsibility is shared.
 Non-custodial parent usually has to pay child support (a
monetary payment to provide for a dependant child for
housing clothes etc.)
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Alimony
 support paid by the wage earned of the family to
the other spouse.
 Usually paid at regular intervals
 Not intended to penalize the person paying
 Look at earnings outlook, current debts,
number of former and subsequent spouses.